I tagli, le canne le Tltro

by Edoardo Varini

È notizia di oggi. I cannabinoidi verranno coltivati nei campi militari della città del Magnifico, che senz'altro era meno magnifico di questo. Di questa cosa. Di invitare il diavolo in mezzo al bianc'azzurro dei vasi officinali. Tra gli alberelli, gli orci e le brocche, ove "la sostanza" evaporerà lo zolfo e lenirà il dolore dei malati.

Il ministro Lorenzin dice che il fatto che un giovane su quattro fumi cannabis è male e che questo non è il primo passo verso l'autocoltivazione da parte dei malati. Ma non ce la vedo la forza pubblica fare irruzione nel giardinetto di un villino a schiera ed arrestare il reo dalla barba malfatta e che magari ha anche nella saccoccia del pigiama tono su tono una regolarissima prescrizione del medicamento.

"La sostanza" ci costa oggi a importarla 15 euro al grammo. Con il nuovo protocollo ce ne costerà la metà. Il diavolaccio dei tagli fa più paura di quello delle canne, oppure si inizia a pensare di non poter convivere con le conseguenze dei tagli senza le canne.

Pensionati, iniziate a comprare il vasetto per la piantina. Il Fondo Monetario sostiene che la spending review sarà inefficace senza tagliarvi le pensioni. Senza tagliare a voi ed ai vostri figli e nipoti l'assistenza. Di vasetti ce ne sono infiniti, di tutte le fogge e colori. All'Ikea, per esempio, ne troverete di meravigliosi, a partire da € 0,50.  Di vetro, di terracotta, di paglia, di legno, di ceramica, di plastica, di allumino e di acciaio. Mi sento di consigliare il colore rosa, per ricordarsi ogni tanto della canzone della Piaf: «Quand il me prend dans ses bras / ile me parle tout bas, / je vois la vie en rose...»

La richiesta di rifinanziamento da destinare a imprese e famiglie da parte di 255 banche europee si è fermata a 82,6 miliardi di euro, ben al di sotto delle attese. La condizione per ottenere i finanziamenti era in questo caso che se la banca non utilizza il prestito per aumentare le erogazioni alle piccole e medie imprese non finanziarie, dovrà restituire l'intero ammontare entro due anni.

In Inghilterra una manovra analoga promossa dalla Bank of England funzionò. In Europa il rimedio parrebbe essere meno efficace (aspettiamo pure la seconda delle 6 aste di Tltro, ovverosia dei piani di rifinanziamento di lungo termine di cu stiamo parlando) perché non è ormai solo la liquidità a mancare, è la domanda di liquidità da parte di una classe di piccoli e medi imprenditori per troppo tempo umiliati, offesi, derisi, vessati e abbandonati a se stessi dalle istituzioni proprio nel momento di maggior bisogno.

Noi, come quasi sempre, i peggiori: da noi lo stato non si è limitato a non affrontare il problema della decrescita economica ma ne se ne è rivelato concausa, sia in termini di avida, insostenibile fiscalità, sia di ritardi nei pagamenti. Siamo noi il "Paese peggior pagatore d'Europa": 170 giorni per avere il saldo, a fronte di regole europee che di giorni ne tollerano al massimo 60.

Resta, questa iniezione di liquidità di Draghi, una mossa doverosa e giusta. Le banche si preparino a una corretta valutazione dei piani industriali, le imprese ritrovino il coraggio di investire, la politica esca dal vaudeville e smetta di essere La palla al piede, direbbe Feydeau.

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Buy the rumor sell the pound

By Andrew Wilkinson

The performance of the British pound(CME:BPZ4) the morning after a decisive No vote amongst Scottish voters reminds of us an old television game show. The pound spiked above $1.6500 as the first ballot box was counted, revealing clear lack of appetite from Scots to quit the Union. Yet despite the fact the issue has been settled overnight the British currency fell. It had been widely predicted that the pound would suffer badly had the Yes vote won. On Friday morning the pound is now lower than Thursday’s close, buying just $1.6333. One can almost hear the TV quiz host asking his contestants why they think the pound is lower:

Is it a) because the poll was so close there will likely be another referendum on the issue sooner than we think?

Is it b) because the pound never really fell very hard before the poll in the first place?

Or is it c) – Something else?

For sure the close shave for British Prime Minister David Cameron is likely to open up questions about the future of national politics. The turnout for Thursday’s poll at around 85% was tremendous. But another poll anytime soon seems an unlikely reason to dump the pound on Friday. And the pound had slumped five-cents against the dollar once the YouGov poll projected a possible Yes victory and so it would be unfair to conclude that there was little fear ahead of the vote. The currency options market saw the cost of defensive premiums sky rocket in the run-up to the vote as book runners clamored for protection. So perhaps it makes sense to conclude that the answer is c) – something else. Risk appetite is firmly on with European and London-traded stocks ending the week on a high note and in the wake of fresh record highs for Wall Street. Quite what that ‘something else’ is, eludes us this morning. It could be that the pound’s honeymoon simply didn’t last long in light of the dollar’s rally. That factor continues to grab the headlines as bond yields drift higher.

Chart – The pound quickly gave it all back on Friday

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An Expectation Gap

by Marketanthropology

Ignoring what Yellen continues to emphasize as her intentions to leave rates lower - longer, participants once again focused their attention Wednesday on the updated dot-plot projections, that implied some Fed officials may have turned towards a more aggressive policy path over the next two years. This hawkish bias was confirmed in the market, as 10-year yields rose to ~ 2.6% and 5-year inflation breakevens collapsed to just under 1.72%. Where the rubber met the road - real rates rose; causing the financials and US dollar to surge, commodity currencies to collapse and precious metals to weaken.

Similar to the reaction of the taper-tantrum last year, the ballast of the market continues to not believe that Yellen will err on the side of caution and maintain the status quo, implicitly encouraging inflation to perk before even considering raising rates. Here lies the large expectation gap in the market - and one we expect will capitulate towards the Chairwoman's underlying directive. As Jon Hilsenrath pointed out, the old market adage, "Don't fight the fed", should really be "Don't fight what the Fed says" - this time around the block. This dynamic is contrary to how participants reacted to the last time inflation was troughing during the financial crisis, when traders expectations were greatly in line with the Fed - as they both jumped hand and hand into the trenches. Today, there exists a large hawkish skew in expectations - predominantly swollen by the uncertainty surrounding the Fed's exit plan and the leftover and misplaced biases of previous rate tightening cycles. While we continue to believe participants are putting the cart before the horse when it comes to raising rates and inflation expectations, we have clearly remained offsides over the past quarter in anticipating the timing and catalyst of such a paradoxical resolution. 
Further muddling the waters has been the more aggressive policy and posturing by the ECB in response to persistently low inflation in the eurozone. These actions have encouraged and maintained downside momentum in the euro, which has re-engaged the value trap like conditions for commodities - as the disinflationary trend in the US has once again rebooted on the back of a surging dollar. While the circularity of conditions is enough to make even Rust Cohle smile, the feedback loop has maintained trend in the equity markets with all the smoothness of a Madoff return - basking under the fair weather conditions of moderating inflation. Conversely, this has caused various reflationary assets (i.e. precious metals, commodities, commodity currencies, emerging markets) to stall out for a third time over the past year - as participants inflation expectations have broadly fallen. All things considered, we believe those biases are once again misplaced and find the same relative value that has remained attractive over the past year, in corners such as precious metals and their respective miners, the Australian dollar and emerging market and Chinese equities.

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Japan working on 18 year breakout, Yen 30 year breakdown

by Chris Kimble

CLICK ON CHART TO ENLARGE

Buy & Hold investing has worked pretty well when it comes to many stock indexes around the world. One place where this strategy has been disappointing is the Nikkei 225 over the past couple of decades. If one happened to buy the Nikkei in 1990, they would still be down over 50%, twenty-four years later.

The above chart highlights a resistance line that has been heavy for the Nikkei for almost two decades. The Nikkei is now making an attempt to break free from this resistance line.

At the same time the Yen is working on breaking a support line that has been in place for almost 30 years.

Could a breakout by the Nikkei help push the S&P 500 and major European markets even higher?

Buyer beware- One of the popular ETF's for Japan is EWJ. Check out its resistance line, because it looks a good deal different.

If you like the idea of buying breakouts or shorting breakdowns, these are markets to keep on your radar screen.

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Monetary Policy Weighs On Precious Metals

by Bob Kirtley

Gold has an inverse relationship with the US Dollar so when the dollar declines gold rises. The dollar is affected by monetary policy as decided by the various central bankers across the planet. We recently covered the effect of the European version of QE with an article entitled; ‘Why ECB QE Is Bearish For Gold Prices’ so today we will take a quick look at the ramifications for the precious metals sector emanating from the monetary policy meeting of the Federal Reserve held today.

A brief overview of the Fed’s actions

The two most important points to come out of today’s meeting were firstly that the tapering of QE would continue and finally come to an end in October 2014. The second point was the wording that surrounded interest rates whereby the Fed Chairperson, Janet Yellen, talked along the lines of the following:

The decisions that the committee makes regarding the appropriateness of the time to commence increasing its target for the federal funds rate will be data dependent. Should the goals set by the Fed look to be accelerating in terms of being achieved earlier, then it is likely that the federal funds rate rise could be introduced earlier than expected.

Uncertainty about economic projections would appear to be the order of the day with a policy of steady as we goes rather than hard and fast actions set to a solid timescale.

So there we have it, still data dependent but the door has been opened, if required, for rates to rise sooner. There is no real indication of when this might happen but we have been warned that it could be sooner than we first thought. The markets responded instantly with the US dollar being the main beneficiary, gaining 0.52 or 0.62% on the US Dollar Index, gold closing $12.00 lower, silver down $0.16 and the HUI down 5.39.

Gold, Silver and the HUI

Gold, silver and the mining sector have suffered from a sell off recently to the point of being oversold. A bounce was on the cards from a technical viewpoint as nothing goes down in a straight line.

The coming end of QE brings with it the end of the dilution of the dollar as no more money will not be produced in this manner. As we know the dollar has refused to collapse and of late has been gaining in value when compared with a basket of the other major currencies. With QE more or less behind us, for now at least, the focus is on the prospect of interest rate increases and the timing thereof. The Fed have indicated that they will be small and that the increase will be gradual and as per usual; data driven. This leaves the situation open to interpretation; it could be that we get two rate increases of 25 basis points in 2015 or five increases of 50 basis points. Either way, a better return on cash deposits will tempt investors into cash and hence the dollar will continue to strengthen.

It should be noted that the Japanese and the Europeans are doing their best to push down their own currencies down which has the effect of putting upward pressure on the dollar. If the dollar does continue to trek north then any rally in precious metals will be restricted to say the least.

On the positive side for the PMs is that the last jobs numbers report was somewhat of a disaster in terms of new jobs created coming in at 142,000 instead of 200,00 plus. This maybe an aberration with the trend being resumed next month, but if we continue to get poor jobs numbers then the Fed, being data driven, might be tempted to take action. This action could be in the form of a reintroduction of QE and/or a delay in rate rises, it’s a tad too early to call. We are of the opinion that the reintroduction of QE is unlikely and that the Fed will continue with their strategy of tapering as planned.

Conclusion

I am a precious metals bull, but not a perma-bull, as such a position does not allow the flexibility a trader needs in order to generate profits. By adopting a flexible stance whereby we can be bearish or bullish in any market sector, our options trading team has generated a profit of 895.42% in just 5 years. The super bulls will continue to snort but as retail investors we have to see things as they are and not as we would like them to be.

We are now of the opinion that gold will trade lower and re-test the $1180/oz level, silver; if it breaks below $18.00/oz, then it would experience a severe drop to the $15.00/oz level and the miners as represented by the Gold Bugs Index, the HUI, will test the low of 190 that it made in December 2014 and possible go on to test the 150 level formed in 2008.

The current environment favors the bears so a short trade would be better than a long trade.

We believe there are times to be fully invested and times to exercise the utmost caution. At the moment we are finding it difficult to acquire stocks in this market sector, however, should they keep falling then the bargain buys will present themselves. Having the cash available for such an event is top priority for us and so that’s where the lion’s share of our funds is placed today.

Finally, given what we know today it is hard to see what the catalyst will be that would ignite gold prices and drive a substantial rally. Money printing, political turmoil, terrorism, protests, demonstrations, riots, separatism, sanctions, air strikes, et al have done nothing for the precious metals sector of late.

Got a comment, then please fire it in whether you agree with us or not, as the more diverse comments we get the more balance we will have in this debate and hopefully our trading decisions will be better informed and more profitable.

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Small Countries’ Big Successes

by Michael O’Sullivan, Stefano Natella

ZURICH – Scotland’s vote on independence from the United Kingdom has spurred widespread debate about the secession of small states, such as Slovenia and Croatia in 1991, or the independence drive today in Spain’s autonomous region of Catalonia. But neither a narrow focus on the political and economic implications for Scotland and the UK – nor, for that matter, the referendum’s decisive pro-union outcome – should overshadow the broader lessons of one of the more overlooked geopolitical trends of our time: the rise of small countries.

Roughly 75% of today’s small countries were formed in the last 70 years, mostly as a result of broader democratic transitions and in tandem with trade growth and globalization. Their successes and failures are more germane to current discussions than, say, the fiscal implications of Scottish independence.

The lessons to be learned from these cases are useful not only to new and potentially new small countries. Relatively young small countries in Africa, the Caribbean, and the Middle East can also benefit by examining the secrets of Singapore’s success, the causes and effects of Ireland’s property bubble, and Denmark’s decision to build strong counter-terrorism capabilities, despite its relative safety. Indeed, such considerations can help them to chart a path to economic prosperity and social cohesion.

Of course, in learning from one another, countries must always be careful to avoid the “folly of imitation.” The Nordic countries, for example, have benefited significantly from deeply entrenched social, legal, and political characteristics that are not easy to transfer to their developing-country counterparts.

Moreover, young small countries must recognize that building the institutions and economies to which they aspire will take time. In fact, age may well be the most important factor in small-country performance, with per capita GDP in small countries that were established before 1945 some four times larger than in their newer counterparts.

More established small countries also lead the rankings in other metrics. For example, they occupy nearly half of the top 20 positions in the United Nations Human Development Index.

In general, older small countries outstrip medium-size and large countries in terms of economic and social performance, openness to international trade, and enthusiasm for globalization – features that younger countries should work to promote. But small countries’ economic growth is often more volatile – a tendency that younger states must learn to contain if they are to prosper in the long term.

The question of “large” or “small” government is less relevant, despite the impression given by heated debates in large countries like the United States. Overall government expenditure is only weakly correlated with the size of the government. A better proxy would be public-sector salaries – the only area where large countries appear to benefit from economies of scale. Smaller countries spend more, as a percentage of GDP, on education and health care – another habit that new small countries would do well to uphold.

Indeed, there is a strong positive correlation between the pace of economic growth and “intangible infrastructure” – the combination of education, health care, technology, and the rule of law that promotes the development of human capital and enables businesses to grow efficiently. Small countries account for seven of the top ten countries for intangible infrastructure.

Add to that measures like the quality of institutions, suitability to thrive in a globalized world, stability of economic output, and level of human development, and one can generate a country strength index, in which 13 of the top 20 performers are small, with the most successful being Switzerland, Singapore, Denmark, Ireland, and Norway. A cluster of larger countries is led by Australia, the Netherlands, and the UK. Other “resilient” small countries include Finland, Austria, Sweden, and New Zealand.

To be sure, there is a clear “old European” bias here. Developing small states like Croatia, Oman, Kuwait, and Uruguay may consider exhortations to emulate countries like Switzerland and Norway to be impractical.

But a useful set of priorities can be gleaned from their experiences. Specifically, small developing countries should focus on building institutions, such as central banks and finance ministries, that explicitly seek to minimize the macroeconomic volatility associated with globalization. They should also advance the rule of law, develop strong and efficient public education and health-care systems, and encourage domestic industry to emphasize return, rather than cost of capital, as their guiding metric.

Beyond emulation, small countries can help one another through direct alliances. Surprisingly, very few such alliances exist, with many small countries – especially developing ones – cultivating close ties with “big brother” countries or immersing themselves in regional federal structures. The risk, of course, is that their voices become drowned out by larger entities, impeding their ability to do what is best for their own citizens.

In a fast-changing geopolitical and economic environment – characterized by challenges like interest-rate rises spurred by high debt levels; competitive corporate-tax reductions; changing immigration patterns; and a possible slowdown in the pace of globalization – small countries must be able to identify and assess risks, and adjust their strategies accordingly. Indeed, even without full independence, this is precisely what Scotland, which has been promised even greater autonomy within the UK than it already has, will have to do if it is to succeed.

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